CFTC Publishes Rule Enforcement Review of ICE Futures

The CFTC Division of Market Oversight ("DMO") published the results of a rule enforcement review of ICE Futures U.S. ("ICE").

The DMO assessed ICE's market surveillance program's compliance with elements of Core Principles 4 and 5, as outlined in CEA Section 5(d) ("Designation of Boards of Trade as Contract Markets"), regarding the prevention of market disruption and position limits or accountability.

The DMO found that ICE has "appropriate tools for monitoring daily trading activity and large trader positions," and that ICE has "adequate" procedures for monitoring the deliverable supply of physical-delivery contracts. However, the DMO also stated that ICE needs to make improvements, and made recommendations that include the following:

• since ICE's Regulatory Oversight Committee ("ROC") has an even number of members and no tie-breaking procedures, ICE should either implement tie-breaking procedures to resolve tie votes or ensure that the ROC is composed of an odd number of members greater than one;
• ICE should maintain staffing sufficient to perform all of its surveillance responsibilities, including the timely completion of surveillance investigations;
• if ICE intends to sanction the misreporting of open interest alongside its clearinghouse, then it should implement rules stating that open interest misreporting represents a violation of ICE rules;
• ICE should formalize the role of its staff in enforcing open interest reporting requirements of the clearinghouse; and
• ICE should require market participants to resubmit detailed information on at least an annual basis to support their hedge exemptions, as well as ensure, prior to granting a hedge exemption, that applicants complete each question in their exemption applications.

See: Rule Enforcement Report of ICE Futures U.S.